I give all of my money in Bank Account number #1 at Big Bank, to my daughter, Samantha Smith.

A general bequest is a gift of a specific amount, made to a specific person. This is considered a general bequest because only the value of the property is relevant, not its source. An example of a general bequest is: I leave $10,000 to my niece, Jody Smith. (It is not important from where the $10,000 comes from.)

If the testator states the source of the funds, this is a general bequest known as a demonstrative gift. An example of this is: I give $10,000 to my cousin, Jamie Smith, from my account number #1 at Big Bank. The gift amount is general, but the source of the funds is specific.

If you just leave everything to a specific person or persons, this is known as a residuary gift. I will not be discussing them in detail here.

HOW CAN THERE BE A DANGER IN MAKING A GIFT?
Some of the dangers that can arise from an improperly drafted specific bequest include ademption, confusion, an unequal sharing of taxes and an unequal sharing of expenses.

ADEMPTIONAdemption is the term used when the decedent no longer owns the property that he or she is giving away. For example, if the decedent in the example above sold 1 Main Street shortly before his death and purchased 2 Main Street, then Jake Smith will get nothing. Because the decedent does not own 1 Main Street at the time of his death, he cannot possibly give it to Jake and the property is considered to be adeemed.

Another huge problem with ademption occurs when an agent under a power of attorney sells the property. Then, it will depend upon the state whether the beneficiary gets something or not as some states require that the beneficiary receive an amount equal to the fair market value of the property. I prefer not to specifically name anyone as the beneficiary of real estate or other large ticket items, and if the client insists, I require that they tell me what they would want to do if the property is sold before they die.

CONFUSION
Confusion can result in a number of different ways. One way it can result is if one of the people named as beneficiaries dies - what happens to the bequest? It may depend upon the state. Some states say that the gift goes to the children of the deceased beneficiary. Some states say that the gift lapses. I prefer to explain what happens in all cases and not rely on state law. I will add one of the following in every case: "If Jody Smith does not survive me, this gift shall lapse." or ""If Jody Smith does not survive me, this gift shall be distributed to..."

Another cause of confusion can arise from gifts of stock. What happens if the stock splits or the company creates a subsidiary or is bought out? The answer to this can vary by state. Unless the testator is the owner of a small business and we are engaged in business succession planning, I usually advise clients not to make specific gifts of stock.

AN UNEQUAL SHARING OF TAXES
Making a specific or a general gift can result in an unequal tax burden because in many states, like New Jersey and Pennsylvania, there is an inheritance tax. Beneficiaries will be taxed differently depending upon their relationship to the decedent. So, if a New Jersey decedent left $10,000 to his son and $10,000 to his nephew, the nephew's gift would result in a 15% tax, but there would not be any tax on the bequest to his son.

If a Pennsylvania decedent left $10,000 to his daughter and $10,000 to his brother, the bequest to his daughter would result in a 4.5% tax and the bequest to his brother would result in an 12% inheritance tax. For a full range of all the different tax rates, please review this inheritance tax chart.

So, who should pay the tax in these situations? You can have three results:

Each person who receives money pays their own taxes at their own rate.

They split the taxes equally.

The residuary beneficiaries (possible a third party) can be required to pay the taxes.

Each state has a different requirement, but the testator can override state law by stating who should pay the taxes. A good attorney will help you identify when this might be an issue and help you decide how the taxes should be paid.

AN UNEQUAL SHARING OF EXPENSES
A similar analysis can be made for the unequal sharing of expenses. If you leave $90,000 to your daughter in a specific bequest and leave everything else to your son, most Wills require that the expenses of the estate administration be paid out of the residuary. This may be fine if your son is getting more than your daughter, but what if it's the same or less? These kind of issues must be dealt with in the estate planning stage, not after a person's death.

Estate Administration can be a bit complex, so make sure you contact an an experienced probate attorney if you even have the slightest doubt about how to handle any of these issues.

The attorneys at the Law Office of Kevin A. Pollock LLC also serve clients in the following areas:Burlington County NJHunterdon County NJMercer County NJMiddlesex County NJMonmouth County NJOcean County NJSomerset County NJBucks County PABroward County FLPalm Beach County FLNew York County NYWestchester County NY

The Law Office of Kevin A. Pollock LLC in Boca Raton, Florida is located in Palm Beach County about 25 minutes south of West Palm Beach and 25 minutes north of Fort Lauderdale. We are 5 minutes south of Delray Beach, FL.

Kevin Pollock

About Me

Kevin graduated from Tulane Law School in 1999 and received a Masters in Taxation from New York University School of Law in 2000. He graduated from Rutgers College in 1996 with a bachelor’s degree in history and a minor in Japanese. Kevin also spent a year studying abroad in Japan. Kevin is a member of the Mercer County Estate Planning Council, Mercer County Bar Association and the New Jersey State Bar Association.
In addtion to the practice of law, Kevin has also taught as an adjunct instructor at Mercer County Community College and was a member of the Lawrence Township Board of Education from 2006-2009.
Originally from Ocean Township, New Jersey, Kevin is the youngest of three children. He currently lives in Lawrence Township with his wife and two children. Kevin is licensed to practice in New Jersey, New York, Pennsylvania and Florida.

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